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TMI Blog2017 (7) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... en brand rates fixed by the Development Commissioner, wherever All Industry Rates of Drawback are not available - in so far as the other entitlements are concerned, these are set out in clause (c) of paragraph 6.11 of the 2009 FTP. Sub-clause (i) speaks about reimbursement of CST; sub-clause (ii) speaks about exemption from Central Excise Duty on goods procured from DTA on goods manufactured in India. Sub-clause (iii) provides for reimbursement of duty paid on fuel procured from domestic oil companies/depots of domestic oil Public Sector Undertakings, as per drawback rate, notified by DGFT from time to time. It also provides for reimbursement of additional duty of excise levied on fuel under the Finance Act, and lastly, clause (iv) provides for cenvat credit on service tax paid. In chapter 6, there are provisions for other entitlements, such as, those given in paragraph 6.12. A holistic reading of the Scheme of Chapter 6 is, indicative of the fact that, there are several entitlements available to an EOU unit, none of which seems to suggest that it is either prohibited from purchasing goods from a DTA unit or from making a domestic sale, subject to it fulfilling the threshold NFE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent, the respondent company is the original Writ Petitioner. 4. The challenge, which was raised by the Writ Petitioner, was on account of the refusal on the part of the appellants to reimburse CST, in respect of the purchases made from an EOU. 4.1. It is pertinent to note that the respondent company, which is the original Writ Petitioner, is also an EOU. The request for claim for refund qua CST was made, in the context of the provision of Paragraph 6.11(c)(i) of the Foreign Trade Policy, 2009 (in short 2009 FTP), pertaining to the period 2009-2014. 4.2. The appellants resisted the claim on the ground that the reimbursement of CST vis-a-vis purchases made by an EOU was restricted to the supplies received from an unit located in a Domestic Tariff Area (in short DTA). 4.3. In support of this stance, the appellants, not only relied upon the provisions of paragraph 6.11 of the 2009 FTP, but also, sought to place reliance on the provisions of Appendix 14-I-I. In particular, emphasis was laid on clause (2) of Appendix 14-I-I. 4.4. The learned single Judge, after a detailed discussion, on the submissions raised, for and against the relief sought for in the Writ Petitions, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a DTA. 5.3. It is, in this background, learned Senior Counsel went on to submit that because the Government of India was desirous of incentivising exports, that it made the necessary amendments in the Foreign Trade Policy of 2015-2020 (in short 2015 FTP), by specifically providing in Clause (2) of Appendix 6H that reimbursement of CST would be made not only vis-a-vis purchases made from DTA, but also qua those which were sourced from EOUs, Special Economic Zones (SEZs), Electronic Technology Hardware Parks (EHTPs), Software Technology Parks (STPs) and Biotechnology Parks (BTPs). 5.4. In sum, the emphasis was that, it was an amendment, which was prospective in nature and, therefore, could not help the cause of the respondent company/original Writ Petitioner. Therefore, learned senior counsel submitted that the amendment provided a clear indication that in respect of 2009 FTP, reimbursement of CST was restricted to supplies received by an EOU from DTA. 5.5. In nutshell, Mr.Rajagopalan, contended that 2009 FTP should be construed strictly. According to him, the interpretation placed on the 2009 FTP by the learned single Judge, was flawed in law as well as on facts. 6. As a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s as suppliers, but also EOUs, SEZs, EHTPs, STPs and BTPs. This amendment, according to Mr.Venkataraman, was clarificatory in nature, which only restated the position of the Central Government taken while formulating the 2009 FTP, which is that, it would reimburse CST to EOUs, irrespective of the source of supply. 6.5. Furthermore, learned counsel submitted that the argument advanced by Mr.Rajagopalan to the effect that since, goods manufactured by EOU were not deemed as goods manufactured in India and, therefore, no Central Excise Duty was levied, was flawed for the reason that it was contrary to the provisions incorporated, both in the FTP, as also, in the 1944 Act. 6.6. In this behalf, Mr.Venkataraman, laid emphasis on the fact that it is not, as if, EOUs are not permitted to sell their goods in the DTA. According to the learned senior counsel, paragraph 6.8 of the FTP, permits generally 50% of FOB value of export to be sold in the DTA. According to the learned counsel, one of the important conditions, which the EOU has to satisfy is to achieve the prescribed Net Foreign Exchange earnings (in short NFE) and, if, that is attained, the EOU would be entitled to sell 50% of F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior counsel, thus, submitted that the argument, which may, perhaps, be available, vis-a-vis a SEZ unit to the appellants was not available qua an EOU unit. In support of his contentions, learned senior counsel relied upon the following judgments: (i).Collector of Central Excise V. TVS Whirlpool Limited, 1994 (74) ELT 496 (Mad.); (ii).C.S.T. Vs. M/s.Auriaya Chamber of Commerce, (1986) 3 SCC 50; (iii).M.P.Steel Corporation V. CCE, (2015) 7 SCC 58; (iv).Jantia Hill Truck Owners Association V. Shailang Area Coal Dealer and Truck Owner Association, (2009) 8 SCC 492 ; (v).State of Bihar V. Asis Kumar Mukherjee, (1975) 3 SCC 602 ; (vi).State of Bihar V. Bihar Distillery Ltd. (1997) 2 SCC 453 ; (vii).Seaford Court Estates LD V. Asher, (1949) 2 K.B. 481; (viii).Kunj Behari Lal Butail V. State of H.P., (2000) 3 SCC 40; (ix).State of Bihar V. Bihar Distillery Ltd., (1997) 2 SCC 453; (x).India Cements Ltd. V. CCE, Trichy-1, 2013 (297) ELT 508 (Mad.); (xi).Zile Singh V. State of Haryana, (2004) 8 SCC 1 ; (xii).WPIL Ltd. V. CCE, (2005) 3 SCC 73 ; (xiii).Union of India V. National Federation of the Blind, (2013) 10 SCC 772 ; (xi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the same, both for imported as well as indigenous raw materials/capital goods. 8.6. Furthermore, it appears that the imported raw material and goods are not subjected to Sales Tax or Value Added Tax (in short VAT), or CST, in terms of the CST Act, 1956. However, goods/raw material, sold domestically are taxed by certain State Governments, who seek to impose local sales tax, by virtue of local enactments. 8.7. One such case is the State of Tamil Nadu, where, local Sales Tax is levied under the Tamil Nadu Value Added Tax Act, 2006 (in short, TNVAT Act 2006). The local Sales Tax imposed via TNVAT Act 2006, as it appears, is cenvatable, as it is allowed as Input Tax Credit (in short ITC) under the TNVAT Act, 2006. In other words, the respondent company/Writ Petitioner can either utilize the ITC, while discharging the liability to pay output tax on finished goods or, simply claim refund qua the same under the TNVAT Act, 2006. 8.8. However, in so far as the CST is concerned, there is no exemption for sale and purchase of raw material or goods, which takes place in the course of inter-state sale or purchase under the CST Act, 1956. Thus, in effect, the suppliers of raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has brought the respondent company/Writ Petitioner to Court. 10. Therefore, in order to appreciate the controversy at hand, one would have to first set down the relevant provisions of 2009 FTP, on which reliance is placed by the parties herein. In this behalf, the provisions of paragraph 6.11, along the relevant extract of the Appendix 14-I-I is set forth hereinbelow: Entitlement for supplies from the DTA 6.11 (a) Supplies from DTA to EOU / EHTP / STP / BTP units will be regarded as deemed exports and DTA supplier shall be eligible for relevant entitlements under chapter 8 of FTP, besides discharge of export obligation, if any, on the supplier. Notwithstanding the above, EOU / EHTP / STP / BTP units shall, on production of a suitable disclaimer from DTA supplier, be eligible for obtaining entitlements specified in chapter 8 of FTP. For claiming deemed export duty drawback, they shall get brand rates fixed by DC wherever All Industry Rates of Drawback are not available. (b) ...... (c) In addition, EOU / EHTP / STP / BTP units shall be entitled to following:- (i) Reimbursement of Central Sales Tax (CST) on goods manufactured in India. Simple interest @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, obvious, paragraph 6.11, is part of Chapter 6 of 2009 FTP, which deals with EOUs, EHTPs, STPs and BTPs. The first paragraph of Chapter 6, which contains the eligibility criteria, inter alia, is indicative of the fact that the benefits available in the said chapter are available only to those units, who undertake to export their entire production of goods and services, save and except, permissible sales in DTA, which are set out under the EOU Scheme or the EHTP Scheme or STP Scheme or BTP Scheme. Inherent in the eligibility clause of Chapter 6 is the indication that these units can make sales wherever permissible to DTAs as well. 11.2. Therefore, the argument advanced on behalf of the appellants that an EOU can never make a DTA sale is intrinsically flawed. This is also discernible, if, one reads paragraph 6.5, (which deals with NFE earnings), along with Paragraph 6.8. Paragraph 6.81 specifically deals with a situation, where an EOU unit can make a DTA sale. 11.3. A perusal of paragraph 6.8 of the 2009 FTP would show that subject to the conditionalities contained therein, as alluded to above, an EOU unit can make a DTA sale. The primary condition being, that sales to DTA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, indicative of the fact that, there are several entitlements available to an EOU unit, none of which seems to suggest that it is either prohibited from purchasing goods from a DTA unit or from making a domestic sale, subject to it fulfilling the threshold NFE, fixed qua the concerned unit. 12. We must, however, confess that the heading/marginal note to paragraph 6.11 is indicative of the fact that the entitlements, provided therein may, perhaps, be restricted only qua supplies received by an EOU from a DTA unit. That being said, as discussed above, the Scheme of Chapter 6 is not suggestive of the fact that there is any impediment on the EOU Unit receiving supplies from DTA or an EOU unit, making supplies to a DTA unit, as was sought to be contended by Mr.Rajagopalan. The heading or a marginal note, in our view, cannot be used to control or override the plain meaning, which emerges on a perusal of the provisions contained in sub-clause (i) of clause (c) to paragraph 6.11 of the 2009 FTP. It is only in exceptional circumstances, and that too for guidance, if, necessary, that heading or marginal notes may be used as an aid to interpretation. (see Montila Ors., REGINA v, [2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms Act, 1962 and the Customs Tariff Act, 1975. This aspect of the matter clearly emerges, upon a bare perusal of Section 3 of the 1944 Act. 15. Therefore, quite clearly, both in law and on facts, it cannot be contended by the appellants that goods manufactured by EOU units are not goods manufactured in India and, thus, do not fulfill the conditionality for reimbursement of CST, as contained in sub-clause (i) of clause (c) of paragraph 6.11 of the 2009 FTP. 16. The other argument of Mr.Rajagopalan that, if, the argument advanced on behalf of the respondent company/Writ Petitioner was to be accepted, then supplies made by one EOU unit to another EOU unit would also qualify for reimbursement of CST, which, in turn, would result in loss of Central Excise Duty to the exchequer, is obviously flawed. This argument, is, to our minds, as flawed as the earlier argument. The answer to this submission lies in our discussion above that goods produced and/or manufactured by an EOU are goods manufactured in India and, hence, would be liable to central excise duty qua domestic sales. 17. This apart, according to us, the 2009 FTP like any other FTP being an economic legislation, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning and Pressing Society Ltd. v. Commissioner of Income Tax Ahmedabad, 177 ITR [1989] 418 SC the assessee a cooperative society claimed that the receipts from the ginning and pressing activities was exempt under- Section 81 of the Income tax Act. The question for interpretation was whether the cooperative society which carried on the business of ginning and pressing was society engaged in`marketing' of the agricultural produce of the its members. The Court held that object of section 81(1) was to encourage and promote the growth of cooperative societies and consequently a liberal construction must be given to the operation of that provision. And since ginning and pressing was incidental or ancillary to the activities mentioned in Section 81(1) the assessee was entitled to exemption and the proviso did not stand in way. In Commissioner of Income Tax, Amrit- sar v. Strawboard Manufacturing Company Ltd., 177 ITR [1989] 431 SC was held that the law providing for concession for tax purposes to encourage industrial activity should be liberally construed. The question before the Court was whether Straw Board could be said to fall within the expression paper and pulp mentioned in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is vested in the Central Government, by virtue of Section 5 cannot be delegated to the DG or an officer subordinate to him. Thus, the amendments to the FTP can only be brought about by the Central Government and not by the DGFT. 19.2. Therefore, to our minds, as correctly argued by Mr.Venkataraman, the provisions of clause (2) of Appendix 14-I-I cannot take away what has been conferred upon the respondent company/Writ Petitioner under the 2009 FTP. 19.3. The delegatee cannot be vested with powers, beyond that which is provided under the parent legislation. Clearly paragraph 2 of Appendix 14-I-I goes beyond what is provided for in the 2009 FTP, as it seeks to change the contours of the provision made in paragraph 6.11(c)(i) of the said policy. As a matter of fact, it appears that the appellant Nos.1 and 2 also understood the provisions of paragraph 6.11.(c)(i) of the 2009 FTP, in the manner, in which, it was understood by the respondent company/Writ Petitioner, as it granted reimbursement of CST for most part of 2010 and 2011, except for the first quarter of 2012 and the periods which followed thereafter. 20. The fact that Appendix 14-I-I went beyond the scope of 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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